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Cablers, FX in fee battle

Media One veep sez cablenet lacks market power to demand 28 cents per sub

NEW YORK — Rupert Murdoch’s FX cable network may be facing some cutthroat negotiations with cable operators. The cablenet is trying to chalk up renewal deals for the channel strictly on the merits of its programming schedule.

“FX doesn’t have that kind of market power,” said Jedd Palmer, senior VP of programming for Media One, the third-largest cable operator in the U.S.

Mike Egan, one of the partners of Renaissance Media, another owner of cable systems, said, “FX will be hard-pressed to maintain the kinds of license fees it’s accustomed to.” The license fee of FX is 28¢ a month per subscriber, which puts it at the mid- to high end of the scale for general-entertainment networks.

FX got on the air four years ago at pumped-up license fees for one reason — Murdoch’s affiliate-sales people tied its carriage to an important quid pro quo: Fox’s agreement to allow cable systems to continue picking up TV stations owned by Fox Broadcasting or affiliated with it, based on a law that had just been passed by Congress. Before it hatched the idea of creating a new cable network, Fox was planning to demand money from cable operators for permission to continue letting them carry its TV stations. Operators’ response to the money demands was succinct: over our dead bodies.

The breakthrough for FX came in 1993 when John Malone, chairman of Tele-Communications Inc., the largest cable operator in the U.S., signed a deal in which he agreed to roll out the still-in-development FX to all of his systems in exchange for retransmitting the Fox TV stations via cable. (The parties lumped these contracts under the umbrella title “retransmission consent,” in the jargon of the industry.)

A number of other cable operators followed Malone’s lead, driving FX’s circulation up to its current 36 million. But still others operators, notably Time Warner Cable, the second-largest multisystem operator, said no because FX was asking 25¢ a month per subscriber. Time Warner still doesn’t carry FX in most of its systems.

But in the last four years (the network began offering programs in June 1994), FX has scheduled such well-known off-network series as “The X-Files” and “NYPD Blue,” plus weekly Major League Baseball games and such reruns as “Beverly Hills, 90210,” “MASH” and, in the fall of 2001, will offer “Buffy, the Vampire Slayer.”

“The quality of our programming and the ratings we’re getting justify the renewal of FX without any retransmission consent,” says Jim Martin, executive VP and head of business operations for the Fox/Liberty Networks, which include FX.

But both Palmer and Egan say the only way their cable systems will renew FX is if Fox/Liberty dramatically lowers the license fee from the current 28¢ a month per sub.

The general complaint of the cable operators is that FX’s two highest-rated Monday-through-Friday series, “The X-Files” and “NYPD Blue,” are available in just about every market in the country twice a week on TV stations through off-network syndication. And the original episodes will continue running in broadcast-network primetime, “Files” on Fox and “NYPD” on ABC.